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Here's exactly what it takes to have an excellent credit score

Sat, 04/06/2019 - 10:30am

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  • An excellent credit score is anything above 800, according Fair Isaac Corp.'s FICO model.
  • A recent LendingTree analysis revealed what the finances of people with credit scores of at least 801 look like.
  • People with excellent credit have an average of nine open accounts, a credit limit around $71,000, a credit utilization rate under 6%, and no record of late or missed payments in the past four years.
  • Visit Business Insider's homepage for more stories.

Credit scores are an essential part of adulthood. 

The three-digit number is an indicator of your trustworthiness as a borrower. If you have a low credit score, or none at all, buying a house, renting an apartment, taking out a loan, or opening a new credit card won't come easy.

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A credit score can be negatively influenced by late or missed credit-card, cell phone, utility, or loan payments, and by using too much of your available credit. It may require careful planning and diligence to repair a bad credit score, but it's not impossible.

The average FICO score among Americans reached an all-time high of 704 last spring. The FICO model categorizes credit scores as poor (300-579), fair (580-669), good (670-739), very good (740-799), and excellent (800-850).

While the average American is in good shape, a recent LendingTree analysis of more than 60,000 people with excellent credit scores (over 800) gives us a peek into the financial lives of above-average borrowers — and it's clear how they got there.

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Perhaps the most telling characteristic of people with excellent credit is this: They haven't missed a single payment in four years of credit history analyzed by LendingTree, and they pay on time, every time.

But that doesn't mean they're debt-free. In fact, there's no way to build credit without borrowing money, since it requires proving you're able to pay back a lender on time and in full. Those with excellent credit scores have an average of $126,306 in outstanding mortgage debt, $11,162 in auto-loan debt, $4,261 in student loan debt, $2,579 in personal loans, and $392 in unspecified debt, according to LendingTree.

They're also using far less of their available credit than the average American, with a credit utilization rate of 5.3% on an average credit limit of $71,353 spread over nine accounts. Meanwhile, the average person living in a large US metro has between $15,000 and $25,000 in available credit, of which they use 24% to 35%, according to LendingTree.

Credit-reporting company Experian recommends keeping your credit-utilization rate under 30%, but the lower the better.

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People with excellent credit also keep their credit inquiries to a minimum — just two in as many years, on average. When we apply for credit — whether it's for a new credit card, a mortgage, or an auto loan — and a lender issues a credit check, it will appear on our credit report and may influence our credit score. This is referred to as a hard inquiry.

Too many hard inquiries may raise red flags for lenders, according to Experian, because they signal a high volume of new accounts in a short period of time, which "may mean you're having trouble paying bills or are at risk of overspending." Hard inquiries remain on a credit report for up to two years.

Across all age groups, the average person with excellent credit has more than 20 years of credit history. The longer a borrower has held onto an account in good standing, LendingTree explains, the more positive the impact on their credit score. Even millennials, the youngest generation included in LendingTree's analysis, have an oldest active account of nearly 15 years.

Need help with your credit? Our partner Experian offers credit reporting and repair » See your options for debt relief with our partner LendingTree »

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I spent a day on NYC's Billionaires' Row. Here's your ultimate guide to one of the city's glitziest streets, which borders Central Park and is home to the most expensive apartment ever sold in the US.

Sat, 04/06/2019 - 10:15am

In wealthy cities around the world, from New York to London to Los Angeles, a certain ritzy neighborhood or street is given an extravagant nickname: Billionaires' Row.

The term generally refers to a super-wealthy part of a city that's home to some of the world's richest people living in some of the world's most expensive homes.

In New York City, Billionaires' Row includes a set of eight ultra-luxury skyscrapers along the southern end of Central Park in Manhattan. The buildings were recently built or, in some cases, are still under construction.

Read more: What it's like to vacation in the exclusive community on the French Riviera nicknamed the 'Peninsula of Billionaires,' where royalty and tech tycoons live in opulent villas

"I like to define Billionaires' Row as New York City's Monopoly board for uber-wealthy international and domestic titans of industry who come together here to work, play, and do lots and lots of shopping," Alexander Glibbery of Compass told me. 

Indeed, Billionaires' Row is just a few blocks from the city's most glamorous shopping district: Fifth Avenue.

StreetEasy describes Billionaires' Row as "an enclave around 57th Street" that's "become a symbol of the city's increasingly stupendous riches."

The new towers at Billionaires' Row — some of which have not yet welcomed residents — have already seen record-breaking real-estate sales.

In January, billionaire hedge-fund manager Ken Griffin broke the record for the most expensive home ever sold in the US when he bought a $238 million penthouse at 220 Central Park South, a Billionaires' Row skyscraper designed by Robert A.M. Stern that's still under construction. 

I walked around Billionaires' Row on a recent spring afternoon. Here's what it looks like.

SEE ALSO: What it's like to vacation in the exclusive community on the French Riviera nicknamed the 'Peninsula of Billionaires,' where royalty and tech tycoons live in opulent villas

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Billionaires' Row is the term for a collection of supertall luxury skyscrapers in New York City along the southern end of Central Park. The buildings are home to some of the most expensive residential real estate in the world. Some were recently finished, and others are still under construction.

These towers have seen record-breaking real-estate sales, including billionaire hedge-fund manager Ken Griffin's purchase of a $238 million penthouse earlier this year — the most expensive home ever sold in the US.

I walked around Billionaires' Row to check out eight of the newest, tallest, and most luxurious towers in New York City.

The borders of Billionaires' Row are not officially defined, but real estate agents described it to me as an area south of Central Park between 57th St. and 59th St., and between 8th Ave. and reaching as far east as 2nd Ave.

Three of the eight towers are on 57th Street, a bustling thoroughfare that includes some classic New York City destinations including the Russian Tea Room and Carnegie Hall.

I started my tour walking along 57th street from east to west. Here's a guide to the buildings you'll find on those blocks.

See the rest of the story at Business Insider

A massive company most people have never heard of owns some of the most famous coffee and café chains in the world, including Panera Bread, Krispy Kreme, and Pret a Manger

Sat, 04/06/2019 - 9:55am

Krispy Kreme, Panera, Pret a Manger, and Peet's Coffee are some of the most beloved chains in America.

However, not everyone realizes that these chains are all owned by the same company. 

JAB Holding is the investment arm of the secretive Reimann family. JAB owns chains including Krispy Kreme, Panera, Caribou Coffee, Au Bon Pain, and Pret A Manger, as well as Keurig Dr. Pepper and bottled-water brand Core. 

Here's a breakdown of all the chains owned by JAB: 

The family behind the massive holding company has been in the news recently because Bild, Germany's largest newspaper, reported that it had uncovered documents that revealed Albert Reimann Sr. and Albert Reimann Jr. were supporters of the Nazi party and that during World War II they used Russian civilians and French prisoners of war as forced laborers. 

Read more: The secretive German family behind the company that owns Panera Bread, Krispy Kreme, and Pret a Manger is donating more than $11 million after the discovery of its Nazi past

When Albert Reimann Sr. was in control of JAB, the company was focused on industrial chemicals. In recent years, however, the holding company has acquired some of the biggest names in food and beverage.

Read on for more details on all the chains JAB owns: 

SEE ALSO: 10 companies you've never heard of control more than 50 of the biggest restaurant chains in the world

JAB acquired Peet's Coffee and Tea in 2012.

JAB Holding acquired Peet's back in 2012 for about $1 billion.

It then did a deal for Caribou Coffee.

JAB also owns Caribou Coffee Co., which it acquired in 2013for $340 million. Caribou Coffee is based in Minnesota.

Next up was D.E Master Blenders 1753.

JAB struck a deal in 2013 to buy the coffee company D.E. Master Blenders 1753, which had been spun out of Sara Lee Corp. a year earlier, for $9.8 billion.

See the rest of the story at Business Insider

Rich millennials are creating new trends and status symbols — here are 7 ways they're redefining what luxury looks like

Sat, 04/06/2019 - 9:55am

Rich millennials' spending habits are turning the luxury sector on its head.

Like the rest of their generation, rich millennials prefer to spend on experiences — but unlike the rest of their generation, they pay extra to heighten these experiences with VIP treatments and customization.

Rich millennials are also creating new trends and status symbols, namely expensive sneakers and streetwear, the latter of which has become entwined with luxury fashion. This is largely due to the role of social media — as more millennials take to Instagram, brands and fashion magazines are losing some of their clout to influencers.

That's not to mention millennials' preference for the share economy, which has trickled into the luxury world. Rental services like Rent the Runway have made luxury goods more accessible to others.

Here are seven ways rich millennials are redefining luxury.

SEE ALSO: 5 things rich millennials do differently with their money than the rest of their generation

DON'T MISS: 7 ways rich millennials spend and display their money differently than rich baby boomers

They spend extra on VIP experiences.

Like the rest of their generation, rich millennials prefer to spend on experiences instead of things. What sets them apart is their willingness to pay more for heightened comfort or service during these experiences to match their lifestyles, wrote Larissa Faw in a post for Forbes.

"For instance, millennials, regardless of socioeconomic status, attend the music festival Bonnaroo, but while non-affluent guests stay in basic tents and use communal showers, affluent Millennials pay more for the VIP experience with a gourmet private chef and golf-cart chauffeur service," she wrote, adding that many festivals and concerts have developed VIP programs for this reason.

She added: "Likewise, millennials may party at the same nightclub, but only the affluent are escorted past the velvet rope to a separate (often elevated) section."

They seek exclusivity and customization in their experiences.

Affluent millennials also prefer to customize their experiences — an added bonus they're willing to spend extra money on. As the elite shift their focus away from goods, "they want personalized experiences that are either inherently unique or specifically tailored to them," Business Insider's Lina Batarags wrote

This is especially true for the affluent millennial traveler, who seeks luxury hotels that offer personalized amenities and attention like cocktail butlers mixing drinks in your room or drink trolleys in the hallways, Batarags reported.

According to Deanna Ting of Skift, luxury hoteliers are using customization to win them over.

"Personalization is what they want," Jenni Benzaquen, vice president of luxury brands in Europe for Marriott International, told Ting. "Luxury used to be one thing to one person but it's no longer about white gloves and white tablecloths. There's no more formality in luxury and hotels need to understand our guests. They want what's unforgettable and unique, and they have a thirst for the unknown and they are going to markets where their friends haven’t been before."

They choose brands based on their mission and values.

But heightened experiences aren't the end all, be all. Instead of replacing the role of brands in wealthy people's lives outright, experiences are augmenting the significance of and consideration that goes into buying a particular brand, Batarags reported.

"Younger generations are less likely to be staunch loyalists to a single brand when compared to their parents and grandparents," Mike Phillips, Wealth-X's vice president of marketing and communications, told Batarags. "They're more likely to try something new if it speaks to their personal values and passions."

He continued: "More and more, the wealthy are evaluating a brand in terms of: What mission does this brand represent? How does it contribute to the greater good ... If I choose to purchase this product, what does that say about me and my values?"

That kind of awareness extends beyond just products, too.

Entire industries are developing or adjusting services to cater to this customer interest, Batarags wrote. Consider wellness, which is increasingly regarded as a modern embodiment of luxury. Accordingly, an array of spas and studios offering treatments like cryofacialsweeklong retreats, and vitamin IV drips are delivering those experiences.

See the rest of the story at Business Insider

Here's why investors shouldn't be too worried about MacKenzie Bezos becoming one of Amazon's largest individual shareholders (AMZN)

Sat, 04/06/2019 - 9:45am

  • MacKenzie Bezos likely won't sell off a significant portion of her newly independent stake in Amazon anytime soon, legal experts said.
  • Following her impending divorce from Amazon CEO Jeff Bezos, MacKenzie will hold 4% of the company's outstanding shares on her own — a stake worth $35.7 billion. 
  • That raises the possibility that MacKenzie Bezos could try to liquidate her assets by selling much or all of her Amazon stake. 
  • However, some practical and potential legal considerations will limit her ability to sell off sizeable portions of that stake in big chunks, the experts said.
  •   Visit Business Insider's homepage for more stories.

Don't expect MacKenzie Bezos to go on a selling spree after her divorce from Amazon CEO Jeff Bezos is finalized.

Nearly all of MacKenzie's newly independent wealth will be likely be tied up in the Amazon shares she will get as part of the divorce settlement, making her one of the comapny's largest individual shareholders. A regulatory document Amazon filed concerning the divorce agreement with the Securities and Exchange Commission indicates that the settlement itself places no restrictions on her ability to sell her shares in the open market.

This could, in theory, have some serious ramifications for Amazon investors: While MacKenzie Bezos is granting Jeff Bezos voting control over her block of Amazon stock as part of the divorce agreement, it raises the possibility that she could try to sell off her stake in a move to liquidate her assets — a manuever that would almost certainly have an adverse affect on the stock price. 

But practical considerations and potentially some legal limits will likely prevent or discourage her from selling off her stake in huge chunks, securities law experts told Business Insider.

One practical consideration is the sheer size of MacKenzie's stake. After a Washington court finalizes her divorce from Jeff, which should happen in about three months, she will hold around 19.7 million shares of Amazon's stock, or around 4% of its outstanding stock — an allotment that's worth around $35.7 billion.

But MacKenzie could easily undercut the value of her shares and any amount she saw from selling them were she to sell off a sizeable portion. About 5 million shares of Amazon are bought and sold daily. Even if she sold just 5% of her stake, that would involve moving nearly a millions shares, or about 20% of that daily volume. Such an uptick could overwhelm demand for the shares and send Amazon's share price downward.

Public perception will be a problem for MacKenzie

Another thing she'll have to consider before selling any sizeable stake is the signal that might send to the market. Post-divorce, MacKenzie almost certainly won't be legally considered an insider at Amazon any more. But any trade on her part, particularly any that happen soon after the divorce, is likely to trigger concerns among investors about the reasoning behind it.

"The public will question whether her sales are motivated by insider information," said Mercer Bullard, a securities law professor at the University of Mississippi School of Law. He continued: "Perception will be a problem. Her actions may be market moving for the wrong reasons."

"If she does plan to sell off a significant portion of her shares, MacKenzie would be wise to set up a planned trading program along the lines of those that corporate executives use to immunize themselves from charges of insider trading," he said. Such plans usually are configured to sell off set numbers of shares on a regular basis regardless of a company's stock price or its recent financial results.

"The way to keep her actions out of the negative limelight is to be as transparent as possible," Bullard said.

The SEC could consider her to be in league with Jeff

Legal restrictions may also limit her ability to sell off large portions of her stake at once, experts said.

When it comes to public reporting requirements and trading limits, securities regulations generally focus on large shareholders and corporate insiders. At first glance, such rules wouldn't appear to apply to MacKenzie Bezos. She doesn't have a position at the company, and her individual stake in Amazon will be below the 5% threshold the SEC sets for when shareholders have to report their stakes in a company and what they're doing with their shares.

But the calculus may change because she's getting her shares from Jeff Bezos, who is an insider, and because, as part of the divorce settlement, she agreed to let him vote her shares. Because of that voting agreement — and the fact that Jeff Bezos will hold 12% of Amazon's shares after the divorce — the SEC may deem her to be part of a shareholder group that controls more than 5% of the company's stock, securities lawyers said. If so, she may have to publicly file regular updates on the size of her stake. She may also have to disclose each and every trade she makes in Amazon's stock.

Read this: Jeff Bezos' divorce won't affect his voting power at Amazon, because MacKenzie is giving him control

"She won't have enough stock on her own," said Paul Fasciano, a partner at Sadis & Goldberg. "But if she's considered to be part of group then, yes," she'll have to report her holdings and trades.

She may have legal limits on her trades

Amazon spokeswoman Halle Gordon declined to comment on whether MacKenzie will be subject to any reporting requirements or trading limits.

And yet another set of regulations may come into play when it concerns MacKenzie's holdings — the SEC's Rule 144, which governs certain kinds of stock transactions involving insiders. Because she will be getting the shares in a private transaction from an insider at the company, the SEC may consider her shares to be restricted, securities lawyers said. Such a designation could require her to hold the shares for six months or even a year before selling any of them.

Additionally, because of the voting agreement she struck with Jeff Bezos, the SEC may consider her to be essentially an affiliate of the company. Such a designation would limit her to selling in any three-month period to either a 1% stake in the company or 1% of the average weekly trading volume, whichever is greater.

"She may have 144 restrictions," Fasciano said.

Got a tip about Amazon or another tech company? Contact this reporter via email at, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Jeff Bezos' divorce could soon make MacKenzie Bezos one of Amazon's biggest shareholders

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NOW WATCH: What's going on with Jeff Bezos and Amazon

Trump just put pressure on the Fed to cut rates. Here's what it'd take for that to happen, according to economists

Sat, 04/06/2019 - 9:10am

  • The Federal Reserve has signaled rates will remain steady this year. It has penciled in one hike in 2020.
  • Trump is pressuring the central bank to cut interest rates, however.
  • But economists say financial and credit conditions would have to be different.

President Donald Trump on Friday stepped up an unprecedented amount of pressure on the Federal Reserve, saying it should cut interest rates. But economists say business and consumer conditions would likely need to change substantially in order for that to happen.

Here are the top paths to a rate cut, according to economists. 

SEE ALSO: Trump steps up pressure on Fed, calls for interest-rate cuts

Financial-market turbulence

Stocks have recovered after booking their worst year since the financial crisis. But another sell-off in financial markets, heightened volatility, or another instance of an inverted yield curve could raise concerns again.

"In this case, the Fed would cut until markets have been supported and the stress has been removed from the system," Bank of America Merrill Lynch analysts said in a research note. "The Fed would be unlikely to bring rates to the zero-lower bound and could actually resume hikes after some time."

To support inflation

Inflation has held below the Federal Reserve’s inflation target of 2%, a stubborn point for central bankers, but remains solid enough. If it were to fall further, however, officials could eventually cut to underscore a commitment to higher inflation.

"If [Fed Chair Jerome Powell] is really serious about low inflation being ‘one of the major challenges of our time’ – either as an economic issue or a political fig leaf – then yes the Fed could cut rates to support inflation,” said Josh Wright, chief economist at iCIMS.


A recession

While growth is expected to slow in the coming months, the Federal Reserve has reiterated that the overall outlook remains solid. A return to strong hiring growth in March has further assuaged fears that a downturn is imminent.

"For the Fed to cut rates, growth would have to be pinned below the economy's potential or financial market conditions would have be to tightening significantly," said Ryan Sweet, an economist at Moody's Analytics.

See the rest of the story at Business Insider

Tesla and Trump both thrive on chaos — but Elon Musk's car company needs to chill out if it's going to succeed (TSLA)

Sat, 04/06/2019 - 8:57am

  • President Trump and Tesla CEO Elon Musk have a much higher chaos tolerance than the average human.
  • But as Tesla grows, chaos isn't helping to improve its chances to prosper.
  • Trump is never going to change, but Musk has a chance this year to reset Tesla's paradigm.

I've argued that there are no minds on planet Earth more different that Donald Trump's and Elon Musk's. However, Musk is a canny operator and always has been — and it's clear that he's learned a few things from the Tweeter In Chief.

Trump loves chaos. His latest salvo — a petulant threat to shut down the entire US southern border with Mexico, thereby trashing the relatively robust but still fragile surge in the economy his tax cuts delivered — is a classic example. Nobody knows what the plan is supposed to be, including Trump, and he likes it that way.

Trump sows confusions and dismay so that all anybody winds up talking about is ... confusion and dismay. It's an unfortunate addiction because although his approval ratings are terrible by historical standards, his economy is the strongest in decades and he's been able to plod forward on a broad campaign promise that's become sort of invisible: extracting the nation from never-ending foreign wars. 

Read more: Tesla is proof that the next 20 years in the tech industry won't be like the last 20

Don't confuse my positive view on those issues with a positive view of Trump. But it would be pointless to ignore Trump's extension of the post-financial crisis boom, and if I can find one thing to admire about the guy, it's that although he appears to like military pomp and circumstance, he's something of a pacifist down deep. Or at least he recognizes that stupid wars shouldn't be fought on open-ended timetables.

From Trump to Tesla.

What about Musk and Tesla? Well, it would also be pointless to ignore the all-electric carmaker's monumental achievement: creating ther first new American auto brand in decades. Tesla's first-quarter sales were up a staggering 110% from the same period last year, the carmaker reported last week.

Tesla is now manufacturing and selling three vehicles, and it has come to dominate the nascent electric-car market in just about five years. Even if its financial challenges end up dooming the company's mass-market ambitions, it still has a viable life-raft in its luxury business, with appealing profit margins to go along with it.

You wouldn't necessarily know any of this because the Musk/Tesla chaos engine has been in overdrive for more than a year now. I can forgive you if you've lost track of Musk's many, many controversies, but we got a reminder this week when his latest dustup with the Security and Exchange Commission had a hearing before a judge in New York (both sides were told to don their "reasonableness pants" and come up with a deal they could live with). 

Musk is extremely good at designing, engineering, and serving as head cheerleader and top salesman for electric vehicles. I've driven everything Tesla has ever built, and the cars have all been great. That's a hard trick to pull off, especially for a guy who's on his first car company. 

Musk is bad at the dreary yet necessary plod of auto manufacturing (he dislikes it so much that he's been actively trying to reinvent it for three years). His reaction isn't to step back and ask for help. Rather, it's to double down on the chaos. 

This doesn't always lead to #TOTALFAIL. Musk's dream of a massively automated assembly line for Model 3 sedans ran into the same problem that every effort at massive automation has in the auto industry — it didn't work — and so Tesla quickly threw up a tented line in its factory parking lot. It wouldn't have looked unfamiliar to Henry Ford. And it was widely ridiculed.

But lo and behold, it worked fine and helped Tesla deliver almost 250,000 vehicles in 2018. 

It's time of Elon to hire a COO. 

It was a big, beautiful tent and Musk could have celebrated the seat-of-the-pants innovation a bit more. Instead, he went back to the nutty tweeting and the dank memes and along the way conducted a fairly low-key unveiling of Tesla's next vehicle, the Model Y SUV.

He doesn't seem to have it in him to change, much as Trump doesn't. And maybe he shouldn't. One does need to simultaneously hold two ideas in one's head about Musk: that he's a merchant of chaos; and that he's up there with Henry Ford and Enzo Ferrari and the small number of crazy, complicated visionaries who've created car companies. 

Allow me to toss in a third idea: Tesla would benefit from putting the overall chaos in its past while accepting that Musk isn't going to renounce the madness. This is kind of already happening. Scrappy carmakers with out-there leaders don't usually manufacture hundreds of thousands of vehicles annually.

General Motors, for example, is a rigorously disciplined business that racked up over 650,000 vehicle sales in the first quarter. Even when GM has been in trouble — it did go bankrupt during the financial crisis, after all — it's essential character has never been chaotic.

The best way to hasten Tesla's maturation has already been widely discussed: hire a chief operating officer to effectively run the company while Musk changes nothing. That would've happened already if Tesla (and to his credit, Musk) wanted it to. And in truth, Musk has a capable, long-serving lieutenant in JB Straubel who has already assumed some of this responsibility. 

Tesla could benefit greatly if Elon lays low for a few months.

I like to say that I'm more comfortable with Tesla's chaos because I've been watching the Elon Musk show for a decade and I've seen it before. It's not all that difficult to put the chaos in a box and focus on the business, which as I've already noted has enjoyed the most robust sales growth of any automaker in the industry and is reaping the rewards as revenues rise dramatically each quarter. Car companies are supposed to have massive amounts of cash flowing through their balance sheets, and Tesla is increasingly no exception.

Unfortunately, the business surge has amplified the chaos, raising the stakes. There is a viable strategy here, and it's called "layin' low." Does that mean Musk retired the Twitter handle? No, but it does mean that he could at least consider giving his chaos-lovin' side a few months off. 

The business might actually compel him to do this. Tesla is probably going to post a lower profit for Q1, after two consecutive quarters with solid margins. The carmaker might even swing to a loss. That doesn't mean Tesla is tanking, but it does mean execution is more important than image. For his own and Tesla's sake, I hope Musk has figured that out.

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NOW WATCH: Elon Musk sent a $100K Tesla Roadster to space a year ago. It has now traveled farther than any other car in history.

Inside the Chicago hedge-fund turf war; Goldman Sachs explores plans to create a Netflix for data

Sat, 04/06/2019 - 8:32am


Dear Readers,

Well, that was quick: A week after Lyft's splashy IPO and shares of the ride-hailing company have already come crashing back to earth. Lyft priced its IPO at $72 a share last Thursday evening and opened the next day at $87.24 a share. After a volatile few days of trading, shares closed at $74.69 as of Friday.

One analyst slapped a sell rating on the company this week and initiated with a $42 price target, nearly half its IPO price.

"In order to justify its current market valuation, investors need to take a big leap of faith that the millennials and later generations will forego ownership of a car and opt instead for reliance on a ridesharing service," the research firm Seaport Global Securities said in an investor note.

"Despite the optics of vehicles being an underutilized asset, we believe people will continue to own their own vehicles as primary transportation and instead rely on the ridesharing services as a convenient supplement."

And in the latest blow to Lyft, investors are already placing bets that shares will fall even further. According to Markit's analysis of borrowing activity and the associated fees, Lyft has already become the most expensive US-listed stock to borrow with over $5 million in balances.

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It's clear there were red flags from the start. During Lyft's roadshow, prospective investors grilled the company about its path to profitability.

But what's notable about this particular case is that Lyft's bankers knew how much was at stake. If Lyft flopped, it might close the window for companies like Uber, Pinterest, Slack and others to go public. Investors I spoke with during the Lyft roadshow said the banks took pains to run a disciplined process and not to push the valuation too high. And despite all this, it's been a rocky start for Lyft.

To be sure, a number of tech companies including Facebook saw their shares sink following their public market debuts. Facebook is doing just fine now.

It'll be interesting to watch Lyft in the coming weeks ... I'm still expecting an Uber filing any day now!

To read many of the stories below, you can subscribe to Prime or email me at for a free trial. As always, please reach out with any comments, tips, or feedback.

Thanks for reading!

Inside the Chicago hedge-fund turf war between billionaire Ken Griffin and Dmitry Balyasny

The headquarters of Ken Griffin's Citadel and Dmitry Balyasny's eponymous hedge fund are separated by one mile, the Chicago River, and plenty of bad blood.

All hedge funds are rivals in some sense, fighting each other for talent, data, and alpha, though Balyasny and Citadel appear to be in different leagues given their asset base and recent performance. But several sources have told Business Insider that the turf war between the two Chicago-based hedge funds has reached new heights.

The clearest example given by sources inside Citadel took place in March during the firm's all-hands annual meeting when Griffin displayed an internal email that Balyasny had sent his staff in April of last year with the subject line "Adapt or Die."

A source close to Citadel said that Griffin used the Balyasny email as an example of what "poor culture can do to a firm," adding that he also mentioned Enron in the same meeting. Yet sources inside Citadel say their takeaway from the meeting was that they needed to beat Balyasny, and that it wasn't about the benefits of a strong workplace culture.


Goldman Sachs is exploring plans to create a Netflix for data, and it marks a new frontier for Wall Street

At some point in the not-too-distant future, investors may find themselves ponying up monthly subscription fees to Wall Street banks in much the same way they subscribe to Netflix or Spotify.

At least that's the hope of bankers searching the depths of their institutions for data sources that investors may buy.

And now a job ad from Goldman Sachs provides probably the clearest picture yet for what the business model might look like.

According to a recent LinkedIn posting, the company is looking to hire an entry-level salesperson whose job would include selling internal data, analytics, and risk models as part of a subscription model.

Much like Netflix offers movies and TV shows and Spotify offers music and podcasts, Wall Street bankers have started describing themselves as content creators of a sort, writing research, designing models, devising trade ideas, and coming up with novel ways to fill orders.


Investors are hot on hedge funds again, but old-school stock pickers are getting left in the cold

The hedge-fund industry's exponential growth over the past couple of decades can be at least partially be attributed to the near-mythological status that the early top stock-pickers enjoyed among investors.

Tens of billions poured into these funds and their spin-offs as investors trusted investors like Tiger Management founder Julian Robertson to win big bets in the stock market.

Now, investors are turning to machines over people for their stock hit, and asking hedge funds still run by humans for strategies that can't be replicated by a computer.

Despite bounce-back performances from well-known stock-pickers like David Einhorn and Bill Ackman this year, money has flowed out of these funds faster than any other category — bleeding more than $6 billion through February, while the overall industry is up $1.6 billion, according to eVestment. Last year, the category saw $10.7 billion leave in net redemptions.


A 'hidden asset' at Citigroup has given the bank a dominant position in the fastest-growing business on Wall Street — but challengers are knocking on the door

A "hidden asset" at Citigroup has given the bank prime position in Wall Street's fastest-growing business.

The Treasury and Trade Solutions division is Citi's crown jewel, pulling in $9.3 billion in revenue in 2018.

While less glamorous, transaction banking is a $95 billion-a-year market and will continue to be Wall Street's engine of growth in the near future, according to industry research.

Citi has for years dominated the field, and its treasury unit may be the secret weapon in unlocking the bank's potential and satisfying investors like the activist ValueAct.

But other big banks are making investments and looking to dislodge Citi's stranglehold over the top spot.


'If you pick a favorite and you're wrong, you're fired': Banks are debating how to use Amazon, Microsoft, and Google as they shift to the cloud

After years of hesitancy, owing largely to concerns over security and regulatory compliance, Wall Street is finally turning the corner on its acceptance of the public cloud.

A recent survey of banks' IT budgets showed that 60% of respondents at large firms believed more than half of their workload would reside in the public cloud within the next three years. As it is, just 20% of respondents said they've moved that much to the public cloud.

It shouldn't come as a total surprise that banks are finally interested in moving some of their systems off premise and on to shared remote servers. In making the shift, banks stand to save money previously spent to maintain older technology systems. But, more important, the move will allow banks to innovate faster — a key benefit for Wall Street as it competes with fast-moving newcomers looking to steal market share from them.

And while banks are no longer questioning if a move to the public cloud is the right one, they're worried about how they'll do it. With three cloud businesses dominating the space — Amazon Web Services, Microsoft Azure, Google Cloud — the choice either to pick one or to work with several remains top of mind.


Peter Thiel-backed digital bank N26 is considering a cash-back-type offering as it eyes US expansion

N26 has built a successful digital banking business in Europe that's helped it nab over $500 million in funding and a $2.6 billion valuation.

But as it prepares for a launch in the US, the Peter Thiel-backed fintech is considering ways to better appeal to American clients.

Nicolas Kopp, the US CEO of N26, told Business Insider that one nuance between the US and the European markets is American customer's expectation of some type of points program with their banking products.

N26's standard account in Europe doesn't have any points or cash-back programs, Kopp said. N26 Business, which is geared toward freelancers or the self-employed, does offer .1% cash back on purchases made with the account's Mastercard.

Kopp declined to comment on how exactly N26 would roll out the program beyond saying it would function slightly differently than a traditional points program typical of many credit cards.


Quote of the week:

"Due to their environmental activism, they are reluctant to co-brand with oil, drilling, mining, dam construction, etc. companies that they view to be ecologically damaging. This also includes any religious group/Churches, food groups, political affiliated companies/groups, financial institutions, and more." —a Patagonia reseller on why the retailer, whose fleece vests have become a staple of the Midtown Uniform, is no longer in the business of branding Wall Street or Silicon Valley.

In markets:

In tech news:

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Harvard researchers say that Lyft investors will likely come to regret giving the cofounders so much control with so little stock (LYFT)

Sat, 04/06/2019 - 8:30am

  • Lyft's power structure, which gives founders Logan Green and Josh Zimmer a concentration of voting power, "can be expected" to decrease Lyft's share value in the future, according researchers at Harvard Law.
  • The dual-class structure means that Green and Zimmer have near-total control over Lyft while collectively owning less than 5% of the company.
  • They could also retain significant control while owning as little as 2.65% of the company's equity, the researchers found.
  • This could hurt Lyft's shareholders in the long-term, the researchers found, especially since Green and Zimmer won't necessarily be motivated by the same incentives as other shareholders.
  • Visit Business Insider's homepage for more stories.

Lyft shareholders could come to regret giving up substantial power to CEO Logan Green and President Josh Zimmer, the company's cofounders. 

Lyft shares closed at $74.55 on Friday, nearly $4 below its first trade when the company went public on March 29. While the stock has seen a slight recovery from its all-time-low of $66 in its first week of trading, Wall Street isn't quite certain on how to treat the stock in the long-term.

In a post published Wednesday, Harvard Law School's Lucian Bebchuk and Kobi Kastiel argue that Lyft's corporate governance structure "can be expected" to decrease Lyft's per-share value in the future, and increase the discount at which Lyft's low-voting shares trade.

"Each of these effects would operate over time to reduce the market price at which the low-voting shares of public investors would trade," wrote Bebchuk and Kastiel. "These effects should thus be taken into account by any public investors that consider holding Lyft shares."

At the heart of their argument is Lyft's dual-class share structure. Shareholders that buy Lyft's stock on the public markets buy Class A shares, which come with one vote each. This is compared to the Class B shares that make up the majority of Green and Zimmer's respective holdings. Lyft's Class B shares each grant 20 votes on the holder.

Read more: $1 billion Sequoia-backed data startup Health Catalyst has picked lead banks for its IPO

Following the IPO, Logan and Zimmer had an "absolute lock" on power while owning just 4.96% of Lyft's equity. This collective stake nets them 48.6% of the voting power at Lyft.

Bebchuk and Kastiel found when taken to an extreme, Green and Zimmer could still retain "effective control" of the company with 2.65% of equity in the company, which would still give them 35% of the voting rights, the researchers found.

This is significant, they argue, because "tiny-minority controllers" can distort corporate decision making and ultimately harm other shareholders. Even with less than half of total voting power, their combined block could still swing any vote one way or the other.

In one scenario, Bebchuk and Kastiel found that Lyft's founders would be incentivized to reject a wide range of strategic acquisition offers due to "private incentives," even if all of the other shareholders would benefit from such a transaction. In other words, even if Lyft shareholders wanted to sell, Green and Zimmer could unilaterally turn down the offer. 

SEE ALSO: NYSE used a massive red banner to woo Pinterest away from the Nasdaq for its $12 billion IPO

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NOW WATCH: Wearable and foldable phones are shaking up tech, making 2019 the year of weird phones

These powerful but little-known companies that have been blamed for high drug prices are now coming out of the shadows for a congressional interrogation

Sat, 04/06/2019 - 8:30am

  • The US has a high drug prices problem. Obscure but powerful companies called pharmacy-benefit managers (PBMs) have been blamed for it. 
  • PBMs will now face tough questions from the Senate Finance Committee, which has called in many of their top executives to an April 9 hearing
  • PBMs have been under attack, so the pressure will be on. 

Shadowy but powerful companies that have been blamed for the US's too-high drug prices are poised to step into the spotlight next week, when their top leaders will testify before the Senate Finance Committee

Those companies are pharmacy-benefit managers (PBMs), and their very role is to negotiate drug prices down. But drug companies, facing the heat on high drug prices, have rather successfully deflected the blame to PBMs, saying that they also benefit by helping push prices higher. That argument appeared especially persuasive to members of Congress at a prior Senate Finance Committee hearing in late February. 

In other words, PBMs shouldn't be expecting a warm welcome.

Drug companies have "so far run circles around the PBMs on message control," Stephens analyst Scott Fidel said. 

The April 9 hearing, therefore, "could give the PBMs an opportunity to shift the focus back on the manufacturers for rising Rx prices," he said. 

Read: Everybody is talking about the high cost of prescription drugs. Here's who's actually responsible for the prices you pay.

When it comes to high drug prices, follow the money 

US drug prices are the highest in the world, and prices rise each year like clockwork.

And even though there's been more attention paid to that practice of late, US prices rose again this year on roughly 2,860 drugs, according to Rx Savings Solutions, a software that helps people compare costs of prescription medications.

That's more than last year, when the prices of roughly 2,550 drugs were increased. But this time, the price hikes seem to have been more spread out, with drugmakers waiting "until March instead of January, to avoid scrutiny," said Michael Rea, the founder and CEO of Rx Savings Solutions.

It appears that "drug companies were much more conscientious about their tactics to raise prices this year," Rea said.

These calculations are based on the "list price" of a drug, which a drug company gets to decide. The backlash about high drug prices has been focused on drugmakers because, at the end of the day, prices are their purview. 

But PBMs also get involved in pricing, playing different drug companies against eachother to negotiate back-door discounts for health insurers and employers.

Pharmaceutical companies say this is where the process breaks down, because bigger and bigger discounts force them to hike prices, and so on.

Read: How drug rebates became a powerful force in US healthcare

PBMs on the defensive

As PBMs have been blamed for the US drug price problem, the face of the PBM industry has been changing.

PBMs are increasingly now in-house, folded into the larger corporate machinery of health insurers or even pharmacy chains. So that's who you'll see before the Senate Finance committee on Tuesday. 

Set to testify are: health insurer Cigna's Steve Miller, pharmacy chain CVS's Derica Rice, health insurer Humana's William Fleming and UnitedHealth's John Prince. Those companies all now have their own PBMs, with Cigna buying the largest one, Express Scripts, last year for a whopping $67 billion

See: For people with diabetes struggling to buy lifesaving insulin, a major health company is now offering the drug for just $25 a month

Also planning to be there: Mike Kolar, the interim president and CEO of the lone standalone PBM of the bunch, Prime Therapeutics, which works with Blue Cross and Blue Shield health insurers. 

The pressure will be on. Last time a batch of executives were carted before Congress to talk about prescription drug prices, the CEOs of pharmaceutical giants like Merck and Pfizer deftly parlayed blame along to their discount-negotiating peers. Tuesday's hearing is part of the same series. 

Read: How drug rebates became a powerful force in US healthcare

A word that will likely rear its head a lot is "rebate," a type of discount on prescription drugs that has been especially blamed for our current US drug price quandary. 

Pharmaceutical executives told senators in February that rebates add to overall list prices for drugs, but patients don't always benefit from the discounts when picking up prescriptions at the pharmacy.

This argument has been picking up steam, including among the Trump administration, which has even proposed getting rid of them in some government programs. 

PBMS, then, "will also need to come ready to explain why rebates are value additive to the U.S. drug pricing model, as this will likely be the most visible public forum they will have" before the final Trump administration rebate rule is released, Fidel said. 

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NOW WATCH: Paul Manafort faces over 7 years in prison for conspiracy and obstruction. Here's what you need to know about Trump's former campaign chairman.

Amazon's plan to launch thousands of satellites is accelerating a new space race — and one expert knows how everyday investors can profit from the mania right now

Sat, 04/06/2019 - 8:05am

  • Amazon plans to launch 3,236 satellites into orbit to expand internet access through its Project Kuiper. It's another step in what's becoming a new space race. 
  • UBS analyst Carl Berrisford says the value of the "space economy" will nearly triple to $1 trillion in 20 years, and he sees high speed broadband satellites as the biggest single opportunity in that sector.
  • Amazon, SpaceX and several other companies are preparing big bets on networks of broadband satellites. Only about half the world's population currently has access to the internet.
  • Visit Business Insider's homepage for more stories.

The list of companies jumping into the space race is getting as long as the text at the beginning of a Star Wars movie.

Amazon recent confirmed to Business Insider that it plans to launch 3,236 satellites into orbit, where they will beam high speed broadband signals to regions that don't have internet access. SpaceX has similarly enormous plans. Those companies and others think satellites can help billions of people get access to the internet.

While there are still major cost and technological hurdles to beaming high speed broadband from space, a UBS analyst thinks they will fade over time. That makes satellite-internet technology the core of Carl Berrisford's prediction that the "space economy" will triple to about $1 trillion in value in 20 years.

He writes that a decade from now, the cost of launching a satellite will be only 10% of what it is today, thanks in part to improving reusable rockets. Meanwhile, improvements in technology will decrease latency — or the time it takes for a signal to go from the Earth to a satellite, then back again.

That will make satellite technology appealing to internet providers, he wrote, and it also has implications other areas including data centers and the internet of things.

That, combined with businesses like space tourism from companies including Jeff Bezos' Blue Origin and Richard Branson's Virgin Galactic and other applications like asteroid mining and space-based manufacturing, is why he believes the space economy will ramp up quickly from $340 billion in value today.

For now, Berrisford says the best way to gain exposure to the space industry is to piggyback off this recent progress and invest in publicly traded aerospace, satellite, and communications companies. He expects several to go public in the coming years. Below is a list of a few companies working in the satellite sector.

Note that while OneWeb and Planet Labs are private companies, Maxar Technologies — the parent of DigitalGlobe and MacDonald Dettwiler — is listed on the Nasdaq.

  • DigitalGlobe (Satellite operator) — Has satellites in orbit that capture high-resolution images of Earth.
  • MacDonald Dettwiler & Associates (Satellite manufacturer) — Technology company working in communications and intelligence
  • OneWeb (Satellite operator) — Communications company preparing to launch 900 internet satellites
  • PlanetLabs (Satellite operator) — Designing satellites to map the entire planet

SEE ALSO: America's No. 1-ranked wealth manager for the ultrarich breaks down the 3 mistakes every millennial investor should avoid — and what they should do instead

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NOW WATCH: The founder and CIO of $12 billion Ariel Investments breaks down how his top-ranked flagship fund has crushed its peers over the past 10 years

A political threat that US investors rarely confront is now a force to be reckoned with — and JPMorgan warns it's powerful enough to tank the global economy

Sat, 04/06/2019 - 6:05am

  • US investors are grappling with the nascent rise of populism and policy proposals that could reverse pro-growth programs that are in place. 
  • According to JPMorgan, populism is a paradigm shift that is powerful enough to shape markets for years to come.
  • We spoke to John Normand, JPMorgan's head of cross-asset fundamental strategy, about the risk scenarios in the US, and how investors can prepare for what happens next.
  • Visit Business Insider's homepage for more stories.

Socialism, in the variety of ways it's understood, has recently become a staple of the US political cycle.

It's spread from the political arena into investing and economics commentary, thanks to policies like universal basic income and free college tuition. Once considered largely unworkable, they're now mainstream campaign platforms.

Proposals like these are byproducts of the rise of populism — an approach that discards traditional policies for largely untested ones — from the margins to the epicenter of developed nations. And according to JPMorgan, populism is not just a partisan political issue. To them, it's a nascent, market-moving paradigm shift that US investors should be aware of and ready to position their portfolios for.

So far, various populist shocks — from President Donald Trump's election to Britain's vote to leave the European Union — have had short-lived effects on financial markets.

That's partly because populist leaders across the world have not fully acted the campaign promises that are considered the most damaging, according to John Normand, JPMorgan's head of cross-asset fundamental strategy.

There have been exceptions, of course. Notably, domestic stocks in Greece and Italy have not recovered all the losses they suffered during politically induced sell-offs in 2015 and 2018, respectively. And in the US, the saving grace of the trade war with China has been the boost to consumption that stemmed from tax cuts. 

Going forward, investors may not be so fortunate, and should not assume that the next crop of populist leaders won't fully enact policies that would hurt growth and portfolios. 

"The risk scenario is that the next group of populist leaders who might be running a government at some point in the next couple of years recognizes the negative consequences of their policies much later than current populist leaders have, " Normand told Business Insider.

He continued: "By the time they do, economies and markets would be much weaker than the damage witnessed over the past few years."

Read more: JPMORGAN: The defining feature of the last stock-market meltdown was a symptom of a bigger shift that could trigger crashes for years to come

One source of weakness lies in the monetary and fiscal-policy toolkit that's available to combat the next downturn, Normand said. When the global economy enters its next crisis, there will be less scope to cut interest rates because they were lowered to historical depths after the Great Recession. There's also reduced scope to enact fiscal policy because government-debt levels are already so high. 

These conditions, in turn, could make easier for the electorate to rationalize populist policies that may be detrimental to growth. 

The US is at more risk of this scenario — even more than Europe — as the 2020 elections draw near, Normand said.  

"There seem to be to higher odds of unorthodox policies in the US, if Democrats sweep 2020 elections or if Republicans control the White House and Congress again, because both sides of the political spectrum are more extreme than usual," he said. 

He continued: "That's why US elections are a more material risk for markets than those for the EU Parliament. The EU Parliament doesn’t have much authority, so populist control matters less."

Read more: BANK OF AMERICA: The stocks outshining the market's powerful rally are poised for a sharp reversal — but there's a way to avoid the losses ahead

With the risks in mind, how should investors be hedging their portfolios for an anti-growth outcome? It's still too soon to actually do so, Normand said. After all, the elections are still 19 months away, there will be many other market movers in the interim, and the Federal Reserve's pause on interest rates could juice the economy for longer. 

Still, there are a few important things to keep in mind.

The "fundamental risk," Normand said, is a Democrat sweep that paves the way for left-of-center policies including a reversal of Trump's tax cuts, a wealth tax, and a possible advancement of his trade agenda. 

In his view, US assets are unprepared for such a scenario whether you look at stock price-to-earnings ratios trading close to their long-term averages (so not cheaply), or investors' preference for owning the dollar over defensive assets like the yen and gold.

"If we are correct on both the economy's 2019 growth path and the 2020 risk scenarios, higher valuations and more skewed positions will render underweights in US assets more compelling a year from now," Normand said in a research note.

SEE ALSO: Morgan Stanley's recession dashboard is flashing a signal it's never shown before — and the firm has put together a game plan to avoid the losses to come

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NOW WATCH: The founder and CIO of $12 billion Ariel Investments breaks down how his top-ranked flagship fund has crushed its peers over the past 10 years

'It must really suck to be that dumb': Republican senator says Democrats aren't 'fooling anybody' with Trump tax-return request

Fri, 04/05/2019 - 7:50pm

  • Republican Sen. John Kennedy of Louisiana railed against the Democratic chairman of the House Ways and Means Committee for requesting President Donald Trump's tax returns from the IRS.
  • "I will be very blunt," Kennedy said during an interview with CNN anchor Jake Tapper on Friday. "Chairman Neal, powerful man, head of Ways and Means. I know he's an adult, but I don't think he's like a real adult."
  • Republican lawmakers, such as Kennedy, have called the latest attempt to get Trump's tax returns a partisan move and a means to "[weaponize] our nation's tax code by targeting political foes."
  • "It must really suck to be that dumb," Kennedy said, referring to Rep. Richard Neal. "Look, this is very simple. Mr. Neal wants to screw with the president. He doesn't think the president ought to be president."
  • Visit Business Insider's homepage for more stories.

Republican Sen. John Kennedy of Louisiana railed against Rep. Richard Neal, the Democratic chairman of the House Ways and Means Committee, who requested President Donald Trump's tax returns from the IRS. Kennedy has called the move "wildly dishonest" and "thoroughly in bad faith."

"I will be very blunt," Kennedy said during an interview with CNN anchor Jake Tapper on Friday. "Chairman Neal, powerful man, head of Ways and Means. I know he's an adult, but I don't think he's like a real adult."

"He says that he needs Trump's tax returns," Kennedy added. "He says it's policy, not politics. He has said, I think on CNN, that the reason he needs them is that he needs to determine how well the IRS is auditing taxpayers. I can't believe he really thinks the American people are going to fall for that."

On Wednesday, Neal, a Massachusetts representative, cited an obscure "committee access" tax provision in his request for six years' worth of Trump's tax returns. The tax provision, which was created in 1924 and was last invoked in the 1970s, allows the finance committees to request tax returns from individual filers.

Democrats have long called for the release of Trump's tax returns to investigate potential conflicts of interests or financial wrongdoing. But Republican lawmakers, such as Kennedy, have described the latest attempt as a partisan move and a means to "[weaponize] our nation's tax code by targeting political foes."

Read more: Trump reportedly wanted to fast-track his IRS chief counsel's nomination and prioritized it over his attorney general

"It must really suck to be that dumb," Kennedy said, referring to Neal. "Look, this is very simple. Mr. Neal wants to screw with the president. He doesn't think the president ought to be president. Well, you know, words can't express how much I don't care. It's not Mr. Neal's call."

"The American people have chosen Donald Trump as president," Kennedy said. "If you don't like it, in two years, you can vote against him. In the meantime, don't screw with him, let him try to be president."

"And Mr. Neal, you know, I don't mean any disrespect," Kennedy added. "But he's not fooling anybody. He just wants to get these taxes to screw with the president."

Neal has said that is not the case. "Congress, as a co-equal brand of government, has a duty to conduct oversight of departments and officials," Neal said on Wednesday. "The Ways and Means Committee in particular has a responsibility to conduct oversight of our voluntary Federal tax system and determine how Americans — including those elected to our highest office — are complying with those laws."

Tapper reacted to Kennedy's insults toward Neal on Friday and invited Neal to come onto his show to respond.

"Wow," Tapper said to Kennedy. "You said you don't mean any disrespect, but you said, 'it must suck to be that dumb.'"

Asked about the Committee's request on Wednesday, Trump repeated his longstanding claim that he is being audited and referred the matter to his attorneys and the attorney general. Trump's attorneys have reportedly been preparing to challenge the request and have indicated they are willing go all the way to the Supreme Court to prevent the release of Trump's taxes.

"We're under audit, despite what people said," Trump told reporters. "We're working that out. I'm always under audit, it seems. But I've been under audit because the numbers are big. And I guess when you have a name, you're audited."

It is unclear if Trump is being audited by the IRS. There is no law that prohibits a tax filer from releasing his tax returns during an audit.

SEE ALSO: Trump reportedly wanted to fast-track his IRS chief counsel's nomination and prioritized it over his attorney general

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NOW WATCH: 'He is a racist. He is a conman.' Michael Cohen's most explosive claims about Trump in his blockbuster hearing

A little-known quirk on the Boeing 737 may have made things difficult for the pilots of the crashed Ethiopian Airlines flight (BA)

Fri, 04/05/2019 - 6:46pm

Ethiopia's Aircraft Accident Investigation Bureau (AIB) released its preliminary report on the crash of Ethiopian Airlines Flight ET302 on Thursday. One of the most confounding details to emerge from the 33-page document was the finding that the pilots successfully turned Boeing's troublesome MCAS (Maneuvering Characteristics Augmentation System) off only to switch it back on after the manual trim controls for the horizontal stabilizers didn't work.

Roughly three minutes into the six-minute flight, the Captain asked the First Officer if he could manually trim the rear stabilizer — by hand-cranking a trim wheel on the center console between the two pilots — to point the plane's nose up, the crash report said. 

Seconds later, the First Officer replied that the manual trim control was not working, according to the report. This precipitated the pilots' re-engaging the automatic system and may have ultimately contributed to the flight's demise.

Read more: Boeing and Ethiopian investigators confirm a faulty sensor was triggered on the 737 Max shortly before it crashed.

According to aviation trade publication The Air Current, an idiosyncrasy from the Boeing 737's past may have cropped up on Ethiopian Airlines Flight 302. 

The publication spoke with former Boeing flight control engineer Peter Lemme along with an Australian Boeing 737 pilot.

Both said that pilots flying the older 737-200 were instructed in training that if the plane's horizontal stabilizer is tilted too far in the nose down position, the manual crank won't work while the control yoke is pulled back. 

It's information that has since been removed from the training manuals of subsequent Boeing 737 generations. 

Apparently, this phenomenon is a result of aerodynamic forces on the plane's horizontal stabilizers that "effectively paralyzes" the mechanism that operates the control surface, Lemme told The Air Current. It's an effect that becomes worse as the plane's speed increases. 

The set of circumstances laid out by Lemme and the unnamed 737 pilot applies to the decade's old 737-200, but it also sounds eerily similar to those faced by Flight ET302. 

Boeing was not immediately available for comment. 

The Ethiopian preliminary report did not assign causation for the crash that killed all 157 passengers and crew. 

Boeing is currently working on software updates for the grounded 737 Max fleet.

Most of the updates will be to MCAS.

To fit the Max's larger, more fuel-efficient engines, Boeing had to position the engine farther forward and up. This change disrupted the plane's center of gravity and caused the Max to have a tendency to tip its nose upward during flight, increasing the likelihood of a stall. MCAS is designed to automatically counteract that tendency and point the nose of the plane down when the plane's angle-of-attack (AOA) sensor triggers a warning.

Click here to read more about the Boeing 737 control issue at The Air Current

SEE ALSO: FAA expects Boeing to come up with new software to fix the grounded 737 Max in a matter of weeks

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Amazon paid $97 million to acquire Eero in a fire-sale deal that left some shareholders with practically nothing, according to leaked documents (AMZN)

Fri, 04/05/2019 - 6:30pm

  • Amazon paid $97 million to acquire the WiFi router maker Eero, according to documents obtained by Business Insider.
  • Eero hired JPMorgan in August 2018 to act as its financial adviser, according to the documents.
  • The deal was a fire sale that left owners of the startup's common stock with practically nothing, according to the documents.
  • Eero's three founders are poised to make millions off of the acquisition, according to the documents.

Amazon paid $97 million to acquire the WiFi router maker Eero in a fire-sale deal that left the owners of the startup's common stock with practically nothing but apparently gave the founders multimillion-dollar paydays, according to documents obtained by Business Insider.

The $97 million sales price was significantly below Eero's last reported funding round in 2017, when the San Francisco startup was valued at $215 million by investors. The cut-rate price reflects the pressure on the pioneering wireless startup as it faced increasing competition from Google and struggled under a heavy debt load.

Eero hired JPMorgan in August 2018 to act as its financial adviser, according to the documents.

Despite the acquisition being announced in February 2019 to great fanfare — Amazon said in a statement at the time that it was "incredibly impressed with the eero team and how quickly they invented a WiFi solution that makes connected devices just work" — the terms of the deal valued Eero's common stock at $0.00 per share.

The common shares were ultimately valued at $0.03 a share, according to the documents, a nominal increase that still left almost all employees and investors underwater. Mashable's Rachel Kraus first reported on the specifics of Amazon's acquisition of Eero.

The three cofounders of Eero, as well as certain other company insiders, however, received special payouts in the form of retention bonuses and other awards. Nick Weaver, the CEO and cofounder, is poised to receive more than $7 million, according to the documents.

Nathan Hardison and Timothy Schallich, the other two cofounders, could end up with more than $5 million and $4 million, respectively, according to the documents.

The final amount paid out to the three founders could differ from what was stated in the documents.

Business Insider has reached out to Amazon for comment. Eero declined to comment.

Eero was founded in 2014 by the Stanford University alumni Weaver, Hardison, and Schallich. The company quickly established itself as a pioneer in mesh networking — a technology that uses multiple access points to blanket an entire area with a WiFi signal rather than relying on just one router. Eero’s first product was well-received by tech critics upon launching in 2016, and companies such as Google and Samsung have released similar devices.

The deal underscores Amazon's hard-driving skills at the bargaining table and its quest to snap up assets that will allow it to create the digital "plumbing" of the modern home. The company has emerged as a clear leader in the smart home space following its Echo launch in 2014, with more than 100 million devices with Amazon’s Alexa assistant having been sold to date, The Verge reported. Amazon’s Echo device was the most popular smart speaker of 2018 with 31% of the worldwide market share, according to Canalys.

The Eero deal is also the latest in a string of acquisitions made by Amazon that puts the company in nearly every corner of the home, from the front door to the kitchen.

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'I will nuke you': Elon Musk was accused of shoving and threatening a former Tesla employee — but the company's board says there was no physical altercation (TSLA)

Fri, 04/05/2019 - 5:32pm

  • Tesla's board of directors investigated an incident between CEO Elon Musk and a former employee, the company confirmed on Friday.
  • Bloomberg News first reported the altercation, citing sources that said the incident involved physical contact.
  • Musk has been known for a temperamental management style, according to many past reports. 

Tesla CEO Elon Musk was involved in an altercation with a former employee who had recently resigned, Bloomberg News reported Friday, citing sources with "direct knowledge" of the incident. 

According to the report, an employee had returned to the electric-car company's office in September post-resignation to say goodbye to former coworkers when word reached Musk that he had quit. It was at that point, Bloomberg reported, that Musk unleashed a profanity-laced tirade against the former employee.

"I will nuke you," Musk yelled as the incident spilled from inside Tesla out into the parking lot, according to one of Bloomberg News' sources.

Tesla confirmed in a statement to Business Insider that an incident between Musk and a former employee took place but said there was no "physical altercation."

"Elon did exit an employee at our Fremont delivery center last year due to concerns about his performance, however there was no physical altercation whatsoever," a spokesperson said. "Those reports are simply untrue as confirmed by numerous people that observed the incident first-hand."

Tesla's board of directors also confirmed in a statement with the same wording that it had completed a review of the incident and also found no evidence of a physical altercation.

Friday's report is far from the first time Musk has been accused of temper issues. In December, Wired reported that some Tesla employees were told not to walk past his desk because of the possibility of an unfavorable interaction jeopardizing their career. 

Many sources who spoke with Wired at the time also described frequent outbursts in which Musk would shout at people and call them "idiots." A senior engineering executive said employees even had a name for Musk's behavior: "the idiot bit."

Read Bloomberg's full report here.

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David Droga reveals why he's giving up his cherished independence and selling Droga5 to Accenture Interactive (ACN)

Fri, 04/05/2019 - 5:30pm

If you've followed David Droga, his decision to sell his influential creative ad agency to Accenture Interactive likely came as a big surprise.

Droga5 was one of the largest and most succesful independent agencies, and Droga himself has said he'd turned down multiple acquisition offers. In fact, in an interview just two years ago, Droga extolled the virtues of Droga5's independence, saying he had no interest in selling or being a part of a larger corporation again.

So what changed his mind? In an interview with Business Insider, Dorga said he thought selling was the best way to increase his firm's influence and broaden the scope of its work.

"I want to build this incredibly influential agency," Droga said. "I'm selfishly doing this because I think Accenture Interactive is going to help us, and they're the brightest partners we can have out there."

The deal with Accenture Interactive, announced on Wednesday, will fill a hole in Accenture Interactive, which has become a big advertising concern but didn't have a big, US-focused creative department.

Accenture Interactive also thinks Droga5's team will do more than just that. The company is trying to help clients rethink and revamp the way consumers discover and interact with their products and services, and its CEO Brian Whipple believes Droga5 will help Accenture Interactive create such experiences for clients.

Read more: Accenture Interactive's CEO says its acquisition of Droga5 will give the consulting firm more than just a creative agency

Droga has grand ambitions

Droga said his firm enjoyed being independent. But with Accenture Interactive, he and his team will be able to work with a wider group of clients and do more for them than they would have if they remained independent, he said.

"Our ambitions are grander. Our ambitions are bigger," he said. "This is about what we can do together, period."

Droga also rejected the notion that he's selling out, reiterating that he's had plenty of other opportunites to sell the firm.

"If I wanted to sell out and sort of throw a Molotov cocktail over my shoulder and get on a yacht, I would have done that years ago," he said. "Anyone who knows me and knows us knows that's not what we're about."

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Betting against Lyft is 'the amateur short,' Citron Research says (LYFT)

Fri, 04/05/2019 - 3:49pm

  • Citron Research is long Lyft and says anyone betting against the company is an "amateur."
  • Citron invested in Lyft ahead of its initial public offering and has continued to buy shares in the open market.
  • Watch Lyft trade live.

Citron Research, headed by the short-seller Andrew Left, has strongly criticized investors betting against the ride-hailing company Lyft. The research firm has gone so far as to label shorting Lyft as "the amateur short."

Lyft short bets have neared almost $1 billion in the company's first week as a publicly traded company, with plenty of "dry powder" for further bets, said Ihor Dusaniwsky, the managing director of predictive analytics at S3 Partners, a financial-analytics firm.

The company's IPO was notably volatile, with shares falling 20% in its first few days of trading. Lyft opened for trading at $87.24 and subsequently fell below its IPO price of $72 before partially recovering on Friday.

Citron was a pre-IPO investor, holding its shares for at least two years. In addition, the firm has continued to buy the stock on the open market following the IPO.

Citron said it has 25 years' experience shorting stocks, which have included Wayfair and Tesla, and listed several reasons Lyft is not a suitable short candidate. Citron cites the following reasons not to be short Lyft.

1. Compounder

Active riders have grown more than 500% over the past three years, with use among millennials exponentially higher than older cohorts. This indicates the number of active riders will grow significantly as this cohort ages. Over 70 million people will turn 18 over the next 17 years, many of whom will opt for ride hailing and sharing over vehicle ownership, Citron says.

2. Upward sloping cohort curves

Similar to Amazon, ride-hailing users repeatedly use the company's services, lowering its customer-acquisition costs, Citron said. Ride hailing and sharing are time-saving benefits well in excess of alternatives, implying potential pricing power.

3. The trend is real

Teenagers are no longer tied to their cars, as 16-year-olds with driver’s licenses declined from 46% in 1983 to 26% in 2016. This trend is likely to continue, signaling increased demand for ride hailing and sharing, according to Citron.

"This is not a trendy video game or a GoPro camera … this is a way of life that is saving people time and ensuring safety. Ridesharing is not a fad … it is a megatrend," Citron said.

4. Massive valuation discount to Uber despite taking share

According to preliminary IPO valuations, Uber may go public at a $120 billion valuation. This is a significant premium to Lyft, about six times its public-market valuation despite it taking share in the US market. The two companies control 99% of the market, however. Lyft's share has risen from 22% in 2016 to 39% in 2018.

5. Blue Sky Narratives

Lyft has made significant moves to position itself in the autonomous-vehicle market. In 2018, Lyft reached 5,000 paid self-driving rides in Las Vegas, Citron said. In addition, if ride hailing and sharing adopt a subscription model, Lyft and Uber will have Amazon-like prospects and effectively lock in customers and prevent the competition from scaling.

Some other analysts have also been positive on Lyft, with Wedbush's Dan Ives referring to its large addressable market as a "golden opportunity."

Finally, Citron says that while Lyft lost over $900 million last year, so too did tech giants Amazon, Netflix, and Square in their early days — all of which have produced spectacular returns.

Despite its strong conviction on Lyft, Citron has been known to change its mind. Left famously switched his position on Tesla from short to long just before the electric-car maker announced record results.

Lyft was up 3.5% from last Friday's IPO price.

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Hedge-fund billionaire Ray Dalio says the state of capitalism poses 'an existential threat for the US'

Fri, 04/05/2019 - 3:35pm

As the 2020 presidential race heats up in the United States, Democratic candidates like Sen. Bernie Sanders and Sen. Elizabeth Warren are calling for an overhaul of America's economic and financial policies for the sake of the country's future. Also joining the conversation: hedge-fund billionaire Ray Dalio.

Dalio is the founder and co-CIO of Bridgewater Associates, the Connecticut firm with $160 billion in assets under management. In a LinkedIn post published Thursday, he called for a reformation of capitalism.

He wrote that the "income/wealth/opportunity gap and its manifestations pose existential threats to the US because these conditions weaken the US economically, threaten to bring about painful and counterproductive domestic conflict, and undermine the United States' strength relative to that of its global competitors."

Dalio used data to show there are essentially two Americas, where the top 40% is doing significantly better than the lower 60% and the nature of accrued wealth and educational opportunities for the majority of Americans is keeping them trapped in poverty.

The day after publishing his piece, Dalio announced he and his wife, Barbara, were making a $100 million donation to the most underfunded Connecticut public schools, the largest in the state's history. He said it's a way to help level the playing field in a state that is one of the wealthiest in the country yet still has pockets of extreme poverty and 22% of its youth deemed "disengaged" from school.

In his LinkedIn essay, Dalio said that while the inequality in the country is benefiting the wealthiest Americans as much as it ever has, the economy as a whole is losing in the long run. He explained it's resulted in fewer people being able to participate in the economy as both consumers and workers, as well as political tensions he's afraid will tear the country apart.

"I believe that, as a principle, if there is a very big gap in the economic conditions of people who share a budget and there is an economic downturn, there is a high risk of bad conflict," he wrote. He said that as he sees it, the populist uprisings in the US are resulting in a push toward either socialism or the status quo of capitalism as it's practiced, and he thinks that both would weaken the country. Instead, he called for several actions for reform, including increasing taxes on the wealthy and coordinating fiscal and economic policy.

"The most important thing to watch as populism develops is how conflict is handled — whether the opposing forces can coexist to make progress or whether they increasingly 'go to war' to block and hurt each other and cause gridlock," he wrote. "In the worst cases, this conflict causes economic problems (e.g., via paralyzing strikes and demonstrations) and can even lead to moves from democratic leadership to autocratic leadership as happened in a number of countries in the 1930s."

He wrote that there has to be some level of bipartisan support for economic reform going forward, even while recognizing that polarization is intense: "There need to be powerful forces from the top of the country that proclaim the income/wealth/opportunity gap to be a national emergency and take on the responsibility for reengineering the system so that it works better."

For Dalio, America's leadership either takes on inequality as a national emergency and figures out how to reduce it, or the country's days as a superpower are over.

You can read the full essay on LinkedIn »

SEE ALSO: Hedge fund billionaire Ray Dalio says capitalism is failing America, and we need to take 5 specific actions to save it

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Accenture Interactive’s acquisition of Droga5 will fill an obvious hole in its lineup as the company tries to change the way products are marketed (ACN)

Fri, 04/05/2019 - 2:45pm

  • The deal Accenture Interactive announced Wednesday to buy creative agency Droga5 is about more than just having a creative agency in-house, CEO Brian Whipple said.
  • Accenture Interactive wanted to add the creative talents of Droga5's team to its business, he said.
  • The advertising giant has been focusing on helping clients rethink the way their customers discover and interact with their products and services.
  • Whipple thinks Droga5 can help Accenture Interactive come up with imaginative new experiences for its clients.

Accenture Interactive's deal to acquire creative agency Droga5 is more than it might seem on the surface, say the executives behind the merger.

The planned acquisition, which Accenture Interactive announced Wednesday, will fill an obvious hole in its lineup. Despite Accenture Interactive's large and growing presence in the ad business, it hasn't had much of a traditional creative shop in-house, at least not one that primarily serves the giant US market. Droga5 will give it just that.

But Accenture Interactive isn't a traditional advertising firm, and it has bigger plans for Droga5 than to have the agency design ads for its clients, company CEO Brian Whipple told Business Insider. An arm of the giant Accenture consulting firm, which has deep expertise in technology, Accenture Interactive focuses on helping companies rethink and redesign how consumers are introduced to and interact with their products and services. The company plans to tap Droga5 Creative Chairman David Droga and his team to help clients reimagine those experiences, Whipple said.

"There are many experiences out there that have yet to be reinvented," Whipple said, pointing to areas ranging from health care to the way people board planes to the way they try on clothes in stores. "David and his team," he continued, "will be a tremendous benefit to us, in terms of just bringing creative ideas to our clients about their experiences."

Read this: Accenture Interactive just bought Droga5, right after a top exec at the firm said it's 'just getting started' in its plan to disrupt advertising

Indeed, when evaluating Droga5, Accenture Interactive saw in it the potential for a broad definition of the word "creative," Whipple said. Sure, Droga5 could do for Accenture Interactive's clients what creative agencies traditionally do — create ads and marketing campaigns. But it also promised to augment the creative juices within Accenture Interactive, allowing it to be more imaginative in rethinking customer experiences, Whipple said.

"The ideas for reinventing experience are creative by nature," he said.

Droga5 has already been heading in that direction, Droga said. The agency no longer sees itself as just creating advertising messages or building brands — and its clients now expect it to offer more than just that, he said.

The company sees itself as being in the business of helping rethink the way customers come to and interact with their products, he said. For example, Droga5 might help a motorcycle company not just advertise its bikes, but figure out how to help persuade people who have never even thought about riding one before do so, he said.

"We are an ideas entity," Droga said, continuing, "We like to think of ourselves as creating solutions for our clients."

Teaming up with Accenture Interactive is going to allow Droga5 to head in that direction much farther than it could on its own, because of the former's massive size and capabilities, he said.

"They just give us the capacity to execute that far further upstream and downstream than we ever have," Droga said.

At the SXSW conference last month, Accenture showcased some of the work it's been doing on trying to reinvent the way consumers interact with brands. It showed off an augmented reality experience it built for DuPont Corian that allows customers to design their own virtual countertops with digital devices. It also demonstrated an interactive movie poster for Disney's new "Dumbo" movie that changes based on the emotions it detects in viewers' faces.

"We are ... just beginning to scratch the surface with what I've referred to as the experience marketplace," Whipple said.

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